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IMPACT MANAGEMENT SERVICES

For many second-stage businesses, growing pains come from having to form a department for the first time. For Impact Management Services LLC, it came from having to get rid of one.

Impact, a staffing firm formed in 2002, watched its revenue climb every year since the recession, from $7 million in 2010 to $16.5 million last year. The company this month will open its first satellite office, in Chesterfield Township, to be closer to manufacturing clients in that area.

Problem: Managing growth and the payroll department.

In 2010, the company had about 300 workers placed with clients to manage. Company leadership saw that as more workers were placed, the hairier things got in the payroll department. President Pete Davis estimated that for roughly every 75 workers placed, Impact had to put another person on payroll duties, which include the tasks of checking attendance, workers' compensation and disciplinary issues.

At this point, he had three people working on payroll management and already the processes were becoming disorderly. As more employees became involved, more basic organizational issues popped up.

"The complexities continued to mount. We were dedicating tremendous resources and effort to solve issues there and adding layers of Band-Aids," Davis said.

The problem was bad enough that it caused management stress just thinking about how it was going to take on new clients — normally something to cheer about.

Solution: Davis took what he called an unconventional approach for a staffing firm — he began outsourcing his work. The decision came after the company realized it should listen to its own sales pitch.

"The 'a-ha' moment was when we said, what are we telling our customers to do on a regular basis? Outsource to us. Do what your core business function is while we deal with recruiting," Davis said.

Impact hired a professional employer organization, or PEO, to take care of all payroll-related functions. A PEO also would be able to absorb much of the regulatory hassle that comes when employing people in other states, a nice service for a growing company to have.

The work with the PEO began in 2011, and it freed up several hundred thousand dollars in staff costs. But more important to Davis, it removed a distraction that had staff members thinking not about scaling the business but about how to deal with greater paperwork.

Impact now manages 800 placed workers and is on target to hit $30 million in revenue this year, Davis said. "We're hitting this ramp now because we found those outsourcing solutions that don't slow you down by doing it internally," he said.

Risks and considerations: While in retrospect it seems like an obvious enough move, the switch gave Impact some discomfort at the time. The point at which placed workers deal with their staffing firm most often is when it comes time to be paid. Losing control of how that occurs wasn't a decision taken lightly.

"When an employee called about a paycheck, we controlled the message and how that person was treated. Now they're going to call a payroll company directly about certain issues like tax withholdings. How that person is treated is no longer something I'm in complete control of," Davis said.

Davis also was worried about the ability of a PEO to absorb hundreds of workers at once, and then to continually manage the churn of temporary workers — a business characteristic not exhibited by a PEO's average customer.

"You have no idea the fire hose that's going to turn on," Davis said when the PEO offered to do the payroll migration very quickly.

Impact held a series of meetings to make clear how it wanted its people to be treated when calling about pay issues and to let the PEO know there would be many such calls to ease the transition.

The outsourcing still needs maintenance from time to time. Impact had to hire someone internally to handle overflows of work that the PEO couldn't manage. Last year, Impact switched to one that could handle Impact's growing number of workers.

Gino Wickman, founder of EOS Worldwide LLC

Expert opinion: Gino Wickman, founder of EOS Worldwide LLC in Livonia, coaches second-stage companies to stay laser-focused on their core business and is a big believer in outsourcing.

"That's why small businesses are so strong: all these niche companies doing niche things better than other companies can do them," he said. "The closer my clients get to their core, and outsourcing and stop doing things that aren't core, they tend to be more creative, make more money and grow faster."

It's up to every company to look at its present situation and goals to determine if the function is something it should outsource. But generally the signal to do it is "when things are starting to get complex or starting to take you away from your core," Wickman said.

"If you're forced to keep it and it's not core, you have to make it core by going out and finding the best talent."